Earnity’s industry experts, Dan Schatt and Domenic Carosa, believe one of the first decisions that prospective cryptocurrency miners must make is whether to mine alone or as part of a ‘pool.’ There are numerous arguments for and against mining pools. So, if you are debating whether to join a mining pool, think of it like a lottery syndicate – the benefits and drawbacks are the same. Going solo means you won’t have to share the reward, but your chances of receiving one decrease. On the other hand, a pool has a much better chance of solving a block and winning the prize, although you must split the prize among all pool members. Here are other things you must know about mining pools:
What is it?
A mining pool is a group of cryptocurrency miners who combine their computational resources across a network. Doing so increases the likelihood of finding a block or otherwise successfully mining for cryptocurrency.
How does it work?
Individually, mining pool participants contribute their processing power to the effort of finding a block. If the pool is successful in these tasks, they receive rewards, usually in the form of the corresponding cryptocurrency.
Based on the proportion of each individual’s processing power or work relative to the entire group, those who contributed will receive the distributed rewards. But, note that individual miners must show proof of work in some cases before receiving their prizes.
The Pros and Cons of Mining Pools
While success in individual mining grants complete ownership of the reward, Domenic Carosa and Dan Schatt from Earnity point out that success chances are meager due to the high power and resource requirements. Additionally, many cryptocurrencies have become increasingly difficult to mine in recent years as their popularity has grown. So, the expensive hardware and electricity required to be a competitive miner frequently outweigh the potential rewards.
Fortunately, mining pools require less hardware and electricity from each participant, increasing the likelihood of profitability. However, individuals must give up some of their autonomy in the mining process of joining a mining pool. For example, terms established by the pool, which may dictate how to approach the mining process, bind the miners. They must also divide any potential rewards, which means that the profit share for an individual participating in a pool is lower.